Reed Hastings, the CEO of the popular DVD-by-mail business, sent an email to customers offering an apology and an explanation for a recent rate hike and service transformation that had customers up in arms.

"I messed up. I owe you an explanation," Hastings simply explained.

"It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing."

At the same time that Hastings offered his mea culpa, he also announced further changes: Netflix plans to separate its DVD-by-mail service and streaming video businesses, and to change the name of the original service from Netflix to Qwikster.

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Netflix has been under scrutiny since July, when it announced it was raising prices and separating its DVD and streaming services into two separate payment plans. Netflix previously bundled both options into a single package.

Hastings says the DVD service will be the same as ever, "just a new name." But customers will see a video games upgrade option for game rentals on the Qwikster website.

He said streaming and DVD by mail were becoming two quite different businesses, with very different cost structures. The two businesses offer different benefits that need to be marketed differently.